For life and disability insurers, medical risk assessment is one of the cornerstones of their business. These assessments are evidence-based, i.e. based on empirical data. This makes events such as the coronavirus pandemic all the more challenging for the industry. Among other things, the pandemic brought with it a new long-term illness, for which there was, of course, little data available to begin with: post COVID-19 condition, better known as long COVID.

So how many policyholders are likely to be suffering from long COVID at the end of the pandemic, meaning that they are entitled to disability insurance benefits? This question immediately triggered fears of a worst-case scenario. Fortunately, these fears have not materialised. Instead, Munich Re’s forecasts published in mid-2022, which were encouraging in terms of the number of disability cases triggered by post COVID-19 condition, have been confirmed.

No significant increase in disability claims expected

“Back then, we analysed all of the medical information and study data available and developed a new calculation method to calculate potential claims for the German disability market and to assess the impact of the pandemic on disability insurance”, explains Steven Wiseman, who led the project as Senior Medical Consultant at Munich Re.

The outcome? In the most likely scenario from an actuarial point of view, the project team had calculated an increase in the number of disability claims of 0.5% a year. In the best-case scenario, the increase would have been even lower, at 0.1% per year. “Today, almost two years later, we know that our calculations have been largely confirmed”, says Mathias Orban. He was part of the project team as a Medical Consultant and adds: “Our customers’ claims experience is now actually closer to confirming the best-case scenario than the one we had expected to materialise. In any case, we are a long way off the worst-case scenario in the German market. The situation is similar on an international scale.” Christiane Suchy, Medical Consultant and also part of the project team, adds: “Claims ratios have remained largely stable. While there are certainly some claims that can be attributed to long COVID, loss drivers such as chronic fatigue syndrome as a cause of disability have declined. So what we are seeing is more a shift in diagnoses rather than an increase in claims.”

Large number of individual factors make the calculation complex

In order to calculate the quantitative impact of long COVID on disability insurance, Munich Re's experts had to take numerous individual factors into account and develop their own calculation model. According to the project objective, the model was to be designed in such a way that it could be applied as easily as possible to other markets and also to similar calculations in future pandemics. Let’s start by saying: the model achieved its objective. The challenges had already started to emerge when it came to describing the disease pattern. A definition of post COVID-19 condition was only provided by the World Health Organisation (WHO) in autumn 2021. But much of the data and many of the studies analysed by Munich Re dated back to an earlier period. This hindered comparability, because the studies were not based on a standardised definition of the condition. There is, however, a consensus among doctors about the stages of recovery after a COVID infection.

The acute stage lasts up to four weeks after the onset of the illness and can be accompanied by a wide range of symptoms, including severe fatigue, shortness of breath, generally feeling less fit, coughing, palpitations, psychological and cognitive dysfunction, etc. Doctors refer to ongoing symptomatic COVID-19 (stage 2) if the symptoms persist for four to twelve weeks after the onset of the illness. The term post COVID-19 condition (stage 3) is used as soon as symptoms that arose during or after a COVID infection persist for twelve weeks or longer and cannot be explained by an alternative diagnosis.

Studies based on data on COVID-19 illnesses after the acute stage were analysed. The challenge for the Munich Re team was to scrutinise the studies from an actuarial point of view and to filter out the results relevant to occupational disability. “This calls for a market-specific approach”, explains Wiseman, because: “In Germany, assertion of a claim under an disability insurance policy should generally be based on a limitation of work capacity of at least 50% for at least six months which leads to a disability to perform one’s own occupation.” This is the market standard and variations are possible. This meant that the study data had to be selected and analysed accordingly.

In addition, a large number of other influencing factors are decisive for assessing the potential impact of post COVID-19 syndrome on the disability business. Here is a summary of the main influencing factors:

• Insured population
  The insured population is not the same as the general population. People with occupational disability insurance are in a better socio-economic position, the group has an above-average state of health and – due to the filter of a comprehensive medical risk assessment – also has fewer pre-existing and concomitant conditions. The latter have a major impact on the severity and course of a COVID infection.
• Vaccination rate
  Clinical studies suggest that it is mainly patients who suffer a severe COVID infection that go on to develop post COVID-19 syndrome. Vaccination protects against severe cases. This makes the vaccination rate an important influencing factor. Munich Re assumes that the vaccination rate among the insured population is significantly higher than among the population at large.
• Vaccination breakthrough infections
  As there is no such thing as a vaccine that provides 100% protection, vaccine breakthrough infections do occur. In addition, the effect of the vaccine wears off after six months, meaning that booster vaccinations may be necessary, and new SARS-CoV-2 variants are constantly emerging that could circumvent the protection offered by the vaccine and lead to infections as a result. Munich Re’s new calculation model takes this into account.
• Symptoms
  How many COVID-19 infections remain undetected because they are asymptomatic? This is another question that the team factored into the calculations, as well as the severity of the symptoms. The calculation model makes a distinction between non-hospitalised cases with mild to moderate symptoms and hospitalised cases involving severe to life-threatening symptoms. Both hospitalised and non-hospitalised cases can go on to develop post COVID-19 syndrome.
• Hospitalisation rate and probability of illnesses relevant to occupational disability
  The proportion of patients who develop post COVID-19 syndrome and are entitled to disability insurance benefits is significantly higher among patients who have been hospitalised. This is why the hospitalisation rate is just as important for the calculation as the probability of hospitalised and non-hospitalised patients developing post-COVID-19 syndrome.

The calculation model: a blueprint for other markets and future pandemics

The new calculation model has passed the reality test: the additional disability insurance claims emerging in the German market per year are as predicted, and tend towards the best-case scenario. The fact that this has been achieved, given the large number of influencing factors, already gives an idea as to how much insurance medicine expertise went into the development process.

The hard work has paid off: “Our calculation model is fully adaptable and can serve as a blueprint for other markets and for calculating the impact of future pandemics on life and disability insurance”, emphasises Wiseman. The basic model (see figure) and the individual calculation steps can be adapted relatively easily to suit the specific market or pandemic situation.